The Uganda Revenue Authority (URA) will on June 11, meet a team of lawyers who have challenged the tax collection body over failure to abide by a 2023 Court of Appeal ruling that directed the taxman to have imported motor vehicles valued using the transaction value method instead of the fallback method.

In a letter dated May 23, 2024, addressed to the URA Commissioner of Customs, the legal team led by city lawyer, Phillip Karugaba termed URA’s continued violation of the appeals court order as “illegal taxation” and demanded that it “immediately cease from applying the outlawed fall back method of taxation.

The legal team argued that the Uganda Revenue Authority has continued to use the ‘fall back method’ despite a Court of Appeal ruling in March 2023, which upheld a previous High Court decision declaring the method unlawful and dismissed URA’s appeal in the Testimony Motors case.

“URA takes cognizance of the issues raised in your letter and would like to invite you for a meeting to discuss this matter in detail on Tuesday, 11th June 2024 at 10:30 am in the 17th Floor Boardroom. This meeting will provide us with an opportunity to understand the basis of your information and verify the current custom practices relating to imported cars,” reads URA’s letter to lawyers signed by the Authority’s Commissioner Legal Services and Board Affairs, Catherine Donovan Kyokunda.

The letter further reads: “We believe that an open and transparent discussion about this issue is essential to build trust and maintain a good relationship between URA and the public.”

Given the significance of the allegations which include contempt of Court and notice of a class action, Mrs Kyokunda said it is prudent that “we engage in this dialogue as learned friends and rather play on social media platforms.”

In response, Karugaba wondered: “So we are to explain to ⁦URA why they are in contempt of court! URA wants us to meet in private as learned friends rather than ‘playing on social media!”

Karugaba added: “This is not a game. It is not a private matter. The public has a right to know.”

In March 2023, the Court of Appeal declared that the Uganda Revenue Authority’s practice of taxing imported vehicles using the ‘Alternative Valuation Method’ was illegal, and instead, mandated the use of the ‘Transaction Value Method’ for calculating taxes on imported vehicles.”

Justice Catherine Bamugemereire’s ruling implied URA would have to set import duty rates based on the total amount paid (transaction value) for imported cars instead of using estimates of the car’s fair market value. 

For example, if an individual’s cost of importing a Subaru car is $1,000, URA is mandated by law to use the invoice of $1,000 to determine the tax instead of using its estimates in its system as is the case today.

There have been instances where one, for example, imports a Subaru of 2001 at $2,000 and another person imports a similar car at $1,500 but both pay the same amount of tax. 

We’ve further learnt that URA abandoned the old practice of the transaction value method in 2013.

At the time, URA said it could hardly ascertain the transaction value of the imported vehicles due to the large-scale forgery of invoices and receipts.

Value guide 

Currently, URA has its own ‘value guide’ which its officials use to levy uniform taxes regardless of the cost of the car and the year in which it was manufactured.

The court ruling effectively stopped URA from using its controversial tax assessment system on imported vehicles.

However, URA has continued to use the outlawed method despite appellate courts rejecting the tax body’s appeals.

In response, URA said it has arranged for a meeting with the lawyers on June 11 to discuss the matter in detail.

Credit: Chimp reports